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Talking about Netflix

Posts

More simply: not everyone can even get Netflix streaming or the equivalent, let alone has it

DVD sales have already peaked. They peaked in 2007 and have been in decline since then.

On-demand and streaming subscription services have been growing every year.

Now, you're arguing that there are some people who can't or won't get Netflix because they don't have broadband. Sure. Netflix isn't the only competitor in that space. We're also looking at on-demand cable and satellite and DVRs.

So, yes, there is a non-zero number of people who are going to continue to buy physical media over the next several years instead of subscribing to on-demand services. It's unlikely that they're going to comprise more than a minority niche market. I don't think that we'll see the last DVD printed in 5 years, but we will reach a point soon where it is no longer a given that every movie release sees a DVD printing.

You're kinda doing an All-or-Nothing thing as if the color grey never existed and there aren't degrees of progression in play.

But yeah, magic and the lottery. They're nice. Deathrape? Not so much.

What all or nothing?

You are the one with the unicolour perspective here. You are seeing the situation where DVDs will die because people will just stream shit or the like. And that's it.

And I am saying there are HUGE swaths of people in the same media market as those above who have no access to these alternatives. Or no practical access. Or extremely limited access.

You are ignoring all these people in your analysis. The infrastructure and/or the services do not exist to switch these people off physical media. And the idea that it will in time to kill physical media within 5 years is pretty ludicrous considering there aren't even hints of planned movement in that direction, let alone actual movement.

Your analysis only works if everyone is like the situation you are familiar with. And that's simply not true.

Like I said above, there were places Blockbuster was making money. Think about that and maybe re-evaluate your assumptions. They do not hold everywhere.

DVD sales have already peaked. They peaked in 2007 and have been in decline since then.

On-demand and streaming subscription services have been growing every year.

Now, you're arguing that there are some people who can't or won't get Netflix because they don't have broadband. Sure. Netflix isn't the only competitor in that space. We're also looking at on-demand cable and satellite and DVRs.

So, yes, there is a non-zero number of people who are going to continue to buy physical media over the next several years instead of subscribing to on-demand services. It's unlikely that they're going to comprise more than a minority niche market. I don't think that we'll see the last DVD printed in 5 years, but we will reach a point soon where it is no longer a given that every movie release sees a DVD printing.

Yeah, that's what I was trying to get at with my last response to Halfhand - I'm not saying you won't ever find DVDs or Blu-Rays in stores come 2017 or whatever. I'm saying that by then, their prominence on shelves will have been marginalized considerably.

....I am saying there are HUGE swaths of people in the same media market as those above who have no access to these alternatives.

....our analysis only works if everyone is like the situation you are familiar with.

That all or nothing, Shryke. I'm talking a slow, gradual marginalization. You keep using terminology that doesn't allow for anything even remotely resembling a curve. Just a binary on/off. My assumptions don't have to hold EVERYWHERE. Just in a large enough majority that it seems financially beneficial. The rest will be taken care of by the older, marginalized model until they can catch up.

You can huff about it all you want, there exist large numbers of people who currently lack the ability to switch completely from physical media. And there is little to no indication these people will be not still be large in number 5 years from now. And as long as they exist, they will be catered to because it'd be fucking stupid not to.

The sitatuation that allows one to abandon physical media is not as widespread as you assume.

So, yes, there is a non-zero number of people who are going to continue to buy physical media over the next several years instead of subscribing to on-demand services. It's unlikely that they're going to comprise more than a minority niche market. I don't think that we'll see the last DVD printed in 5 years, but we will reach a point soon where it is no longer a given that every movie release sees a DVD printing.

Well, I guess you might see only Blu-ray, but even that I wouldn't count on.

I don't see any way they are going to be cutting tons of people out of their media markets in 5 years.

I'm not huffing. I swear, you seem to think I debate with you in a frenzied froth with teeth gritted and sweat pouring or something, man. We're just disagreeing over a potential future of a form of media distribution. At 1:30am PST on a work-day, no less. C'mon.

5 years (10 at the outset) is slow & gradual considering, as Feral pointed out, the peaking of this medium happened 4 years ago already. That there are "large" numbers unable to switch from physical to streaming isn't even something I'm arguing. What I'm saying is that the "large" number will likely be dwarfed by then, simply looking at how it's already declining, how streaming is rising, and the history of home video. I'm also NOT saying those large numbers won't be catered to. In fact, I allowed for that already, multiple times. I'm saying that catering will be, by then, a secondary market.

The history of home video is one physical format being replaced by another physical format, so it doesn't seem a relevant example. Physical formats all have certain things in common.

The switch from VHS to DVD to Blu-ray is the same: buy a new machine and it's done. The switch from physical media to streaming involves many more factors out of the consumer's control.

And in what way are DVD sales already declining? What rate? Among what groups? Because all that is very relevant here.

For exmple: to create a simplistic model, we had half the population with highspeed no-cap internet and half with only dial-up, you would still expect to see a rapid-decline in physical media sales as streaming is introduced, but that decline would eventually bottom out without killing the physical media market.

Now I wouldn't guess on what the actual percentages or differences between groups here are, but I think you are seriously kidding yourself if you think the group for whom non-physical options are problamatic isn't large enough to keep physical media from becoming a secondary market. Especially one that doesn't receive all releases or the like.

I mostly agree with @Fatboy Roberts. Bluray wasn't a replacement format in the same way that DVD was to VHS, it's more of an upgrade. And due to the state of broadband infrastructure in the US, it's likely to hold for longer than DVD, purely because no one is even close to streaming BR quality HD to homes yet in any meaningful capacity

On one hand, this is not a surprising move by Netflix. They have stated for some time that the DVD business only existed to prop up the streaming business and would go away eventually. Splitting it off is a great move, because it will eventually die but this lets them ramp down or change business models as needed without impacting the Streaming side.

On the other hand, it really needs to be seamless for someone like me who uses both services. I don't want a lot of extra work to manage two queues. Adding a game service is great, but availability needs to be far, far better than Gamefly and that's not a cheap prospect.

I'm an avid user of both Netflix and Gamefly. If I can get Netflix with games and drop Gamefly to save a bit of money each month, I'm totally fine with that.

I guess I'm one of those people that didn't mind the price hike or this new development. I don't think people realize how much Netflix is going to have to pay for streaming rights when their current contracts run out this year (http://money.cnn.com/2011/07/08/technology/netflix_starz_contract/index.htm). They raised prices to stay profitable, just like any company would and just like anyone that complains about the pricing would if they were in charge.

Anyway, I'm cool with this. I get great joy out of having little red envelopes in my mailbox and even greater joy being able to watch a ton of movies or TV shows whenever I want. They'll have do something way worse than up their prices a bit to lose me as a customer.

ChillyWilly on September 2011

PAFC Top 10 Finisher in Seasons 1 and 3. 2nd in Seasons 4 and 5. Final 4 in Season 6.

The addition of videogames is nice. NetFlix has way more depositories and locations than GameFly.

Don't care about how "seamless" the experience is. I already use NetFlix, Hulu, and Crackle.

This is me right here. I use Gamefly, Netflix and a service called MMA Vault that I get martial arts training DVDs from. I'm used to working with multiple queues. Some people act like it's the end of the world that they might have another queue to deal with, but that's just how I've been rolling for over a year now. It's just not that big of a deal to me.

PAFC Top 10 Finisher in Seasons 1 and 3. 2nd in Seasons 4 and 5. Final 4 in Season 6.

I'm amazed that many people dropped it, honestly. I realize that, by percentage, it was something like a 60% increase. But it amounted to less than $10 extra per month for most people, didn't it? I forget the actual numbers right now, so please correct me if I'm wrong.

PAFC Top 10 Finisher in Seasons 1 and 3. 2nd in Seasons 4 and 5. Final 4 in Season 6.

It's like netflix doesn't like money or something. From one terrible decision to the next. It's like Borders and Netflix are run by the same person.

I mean, couldn't you know, send out a survey to gauge customer feelings? So because you suck at compartmentalizing people should be assed to deal with two different services now? You were better off leaving it the way it was. I think they're trying to save Netflix's streaming from the plummeting stocks, to be honest.

Uh, no physical media is absolutely 100% on it's way out. In 10 years if DVDs have any more presence than VHS does now, I will be shocked.

Especially with Blockbuster dying and people having the ability to download movies/tv shows from amazon, iTunes, Netflix, etc, it is incredibly easy to get a digital version of your show. Plus, most nicer physical media players these days have internet capabilities. My completely tech illiterate parents just bought a blu ray player for their 20 year old CRT massive thing in the living room. They can watch blu-rays with it, just not in high def, but it has a netflix app on it! And an amazon app! It's ridiculously easy for them to get digital content. For ANYONE to get digital content.

The only people still using DVDs are those with an existing large collection they have yet to digitize, and those just blindly holding on for dear life.

Where exactly in the US at least, is there a large number of people that desire their media, but do not have a digital interface with which to access it? That instead must go get a DVD from the store or a rental place? I do not think this place exists. Bandwidth caps suck, yes, but even Comcast has a 250gig one. The average household is going to have a hard time breaking that. The average gamer household probably won't have a hard time with that, but even then, that's not going to drive people towards DVDs. It'll drive people to better ISPs. One hopes. Damn Comcast monopoly.

Physical media is simply being replaced by digital media. For instance, music CDs? They still exist (so does VHS...) but they're not massively prevalent anymore.

It is clear from the feedback over the past two months that many members felt we lacked respect and humility in the way we announced the separation of DVD and streaming and the price changes. That was certainly not our intent, and I offer my sincere apology. Let me explain what we are doing.

For the past five years, my greatest fear at Netflix has been that we wouldn't make the leap from success in DVDs to success in streaming. Most companies that are great at something – like AOL dialup or Borders bookstores – do not become great at new things people want (streaming for us). So we moved quickly into streaming, but I should have personally given you a full explanation of why we are splitting the services and thereby increasing prices. It wouldn’t have changed the price increase, but it would have been the right thing to do.

So here is what we are doing and why.

Many members love our DVD service, as I do, because nearly every movie ever made is published on DVD. DVD is a great option for those who want the huge and comprehensive selection of movies.

I also love our streaming service because it is integrated into my TV, and I can watch anytime I want. The benefits of our streaming service are really quite different from the benefits of DVD by mail. We need to focus on rapid improvement as streaming technology and the market evolves, without maintaining compatibility with our DVD by mail service.

So we realized that streaming and DVD by mail are really becoming two different businesses, with very different cost structures, that need to be marketed differently, and we need to let each grow and operate independently.

It’s hard to write this after over 10 years of mailing DVDs with pride, but we think it is necessary: In a few weeks, we will rename our DVD by mail service to “Qwikster”. We chose the name Qwikster because it refers to quick delivery. We will keep the name “Netflix” for streaming.

Qwikster will be the same website and DVD service that everyone is used to. It is just a new name, and DVD members will go to qwikster.com to access their DVD queues and choose movies. One improvement we will make at launch is to add a video games upgrade option, similar to our upgrade option for Blu-ray, for those who want to rent Wii, PS3 and Xbox 360 games. Members have been asking for video games for many years, but now that DVD by mail has its own team, we are finally getting it done. Other improvements will follow. A negative of the renaming and separation is that the Qwikster.com and Netflix.com websites will not be integrated.

There are no pricing changes (we’re done with that!). If you subscribe to both services you will have two entries on your credit card statement, one for Qwikster and one for Netflix. The total will be the same as your current charges. We will let you know in a few weeks when the Qwikster.com website is up and ready.

For me the Netflix red envelope has always been a source of joy. The new envelope is still that lovely red, but now it will have a Qwikster logo. I know that logo will grow on me over time, but still, it is hard. I imagine it will be similar for many of you.

I want to acknowledge and thank you for sticking with us, and to apologize again to those members, both current and former, who felt we treated them thoughtlessly.

Both the Qwikster and Netflix teams will work hard to regain your trust. We know it will not be overnight. Actions speak louder than words. But words help people to understand actions.

Respectfully yours,

-Reed Hastings, Co-Founder and CEO, Netflix

p.s. I have a slightly longer explanation along with a video posted on our blog, where you can also post comments.

Reads a little trite and douchey if you ask me. It also feels like it was written like a letter to the shareholders, not a customer.

Anyway, it seems like a questionable business decision to me, and raises questions about Netflix management's wherewithall. If you can't compartmentalize two cost structures without seperating them into two companies/services, how do you put your shoes on in the morning without assistance?

People seem to be switching out of spite, not true inconvienience. Which is fine, I guess, but silly. I can't think of any company that offers both by mail and streaming content. There was more than likely a REASON for that. Because no one could figure out how to stay in buisness doing that. And now Netflix is deciding to do that as well.

So if you keep streaming, and decide you hate Qikster (which, based off the name I cant fault you for), and you go to something like Facet (which I hadnt heard of until today) or RedBox...aren't you still managing 2 companies? Redbox has no queue, so that makes it easier in a way, but also has much less of a selection. You still paying for 2 seperate services. Just like Netflix and Quikster.

If you decide you hate Quikster and want just streaming...stick with Netflix. You just proved thier point. The selection is as good as anything else I've seen online. I have both Netflix streaming only and Hulu+. Hulu+ lets me watch shows that just aired, but has no movies. Netflix has some decent shows not on Hulu, and a decent (but in need of improvement) movie selection. If you leave Neflix just because...I really don't understand the mentality behind that.

Yes, having a nice, all in one thing for physical and streaming media was nice, but a lot of things in life are nice and end up going away because of money problems or whatever. Netflix offered something really great, and no longer can. That's sad, but I'd rather they retool and restructure before they go under.

As someone who was too lazy to cancel my netflix DVD rental. I will likely be more apt to cancel my qwikster (and I dont know why this is the case).

Then again, if this videogame part isnt too much more I may just switch to it. It would have to be reasonable. Like 12 dollars for both. But I doubt it will be. In which case I may just drop qwikster and get gamefly.

No, the problem is that they totally can continue to offer something great. They just, for some reason I don't think anyone can properly articulate, decided not to.

I dont think anyone can articulate it because no one understands that they can't

The rates for the rights to streaming shows are astronomical now. They just raised rates and people went INSANE. And even after rasing rates, they STILL couldn't agree on anything with Starz so they're losing them. The content providers gave them all this great stuff at an insane bargain and now all those contracts are up, and they want, in some cases, 10 times the amount. For Mad Men ALONE it cost them $75-$100 MILLION DOLLARS. They can't keep pouring money into the streaming side of things while the DVD side isn't really doing all that well at the same time.

If they COULD do it, they absolutely would. Everyone loves making money. This needed to happen, and it is way, way less a deal than everyone is making it out to be.

As far as I can tell nothing is changing from what they've done already breaking up the pay model.

You already have a separate subscription plan for streaming and DVD. They are just going to flip a switch and whatever sub model you chose for DVD-by-Mail will become a 'Qwikster' account. Your queue and whatnot will just shift over.

This isn't a big deal for me. I already canceled my cable TV which is going to save me about 120 dollars a month. I am looking forward to this, especially if the selections for online streaming get better.

I'll probably end up doing more with the video game rentals than I will with blu-rays, etc.

No, the problem is that they totally can continue to offer something great. They just, for some reason I don't think anyone can properly articulate, decided not to.

I dont think anyone can articulate it because no one understands that they can't

The rates for the rights to streaming shows are astronomical now. They just raised rates and people went INSANE. And even after rasing rates, they STILL couldn't agree on anything with Starz so they're losing them. The content providers gave them all this great stuff at an insane bargain and now all those contracts are up, and they want, in some cases, 10 times the amount. For Mad Men ALONE it cost them $75-$100 MILLION DOLLARS. They can't keep pouring money into the streaming side of things while the DVD side isn't really doing all that well at the same time.

If they COULD do it, they absolutely would. Everyone loves making money. This needed to happen, and it is way, way less a deal than everyone is making it out to be.

Why does any of this mean that they have to break up queues, and searching, and reviews, etc?